CENTRAL EUROPEAN OFFICE

M A Y 2013

Prepared by: Marion S. Wolf Director Central Europe

MARKET INTELLIGENCE / TRENDS

Double-Digit Sales Increase in April

Travel agents in were showered with bookings last month as sales grew at a double- digit rate, according to the latest market survey by researchers GfK. Sales revenues rose by 12% in April, the representative survey of 1,200 agencies showed. This was a minor boom after relatively slow bookings during the previous two months and partly due to the early Easter holidays this year.

The bulk of bookings were for the summer season, which is now 7% ahead of last year on a cumulative basis. Demand was strong for October, when most of Germany has autumn half- term school holidays, leaving cumulative sales for the month up by 17%. July also recovered somewhat to an overall drop of 3.3%.

The winter 2012/13 season closed with a 4% increase after last-minute sales in April failed to materialize on a large scale. This was the third year in a row with overall growth for the winter season. Early bookings for next winter were also healthy, and the season already has a 9% share of overall sales.

The latest figures from the TATS services company, however, told a different story. Its monthly survey showed a 4.4% decline in leisure travel sales compared to one year ago, leaving the cumulative growth rate this year at 2.6%. More positively, ticket sales recovered last month with a 3.6% rise in revenues, the TATS survey found.

Consumer Watchdogs Warn Six Carriers

Six in Germany have been warned by a consumer protection organization for demanding full payment of airfares upon booking. The North Rhine Westphalia consumer protection organization has sent warning letters to Air , Condor, , Germanwings, Lufthansa and TUIfly over the practice. According to the organization, early full payment of airfares, i.e. more than 30 days before the flight are not realistic and airlines could only demand a partial advance payment, if they were insured against insolvency. The consumer representatives also claimed that passengers bore the potential risk of losing their money, if an airline declared insolvency. In addition, early full payment of airfares effectively provides airlines with interest-free loans, according to German media.

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But airlines defended themselves by saying that early payment enabled them to offer early booking discounts and low prices. The carriers now face the choice of agreeing to change their payment systems or potential legal action.

TUI AG: Targeting Higher Profits and Closer Cooperation

TUI chief executive Fritz Joussen has unveiled a new ‘One TUI’ action plan designed to improve profitability by reducing head office jobs, achieving much better results in the hotel and cruises businesses, and stepping up cooperation between TUI Travel and the other TUI businesses to intensify vertical integration.

Joussen, who replaced Michael Frenzel as CEO three months ago, said the overall purpose was to increase the group’s value and make a dividend payment possible again from 2015. He aims to double operating profits from last year’s €519 million to about €1 billion by the end of the 2014/15 business year. In addition, the present negative cash balance should turn into a positive €100 million by 2015, with half coming from the hotel and cruise businesses.

The plans were unveiled this month as TUI presented its results for the half-year ending March 31, 2013. TUI increased group turnover by 2% to €6.8 billion and the seasonal underlying operating loss was reduced by 9% to €339 million from last year’s €372 million. Net results were weaker due to financial provisions for restructuring measures at head office and in the hotels and cruises sectors.

The bulk of the cost reductions will effect the group’s head office in Hannover where more than 80 of the 183 jobs will go, largely through non-replacements, in order to cut costs from the present €73 million to €45 million in the medium term.

Joussen is putting a strong focus on improving internal cooperation and indicated that TUI’s tour operators will be expected to cooperate much more closely with the hotel brands in the future to improve room utilization and increase internal synergies. The overall goal, according to TUI, is to transform the business model from a tour operator dominated one towards content and brand oriented value creation based around the group’s hotels and cruise ships. “Content combined with a strong brand leads to differentiation. Differentiated, exclusive products guarantee higher average prices and improved margins,” Joussen stated.

SALES ACTIVITIES

Alamo Travel Trade Fam Tour (May 11th – 13th, 2013): We were approached by Alamo Germany, with whom we work very closely, regarding an opportunity to showcase our area to a group of product and sales managers from Lastminute.com/Holiday Autos in May. Lastminute.com/Holiday Autos is Alamo’s largest European customer for travel to the USA generating 30,000 bookings annually. The group of 7 pax will be on a whirlwind tour through Florida arriving in Miami on 5/09, staying for two nights, departing MIA on 5/11, driving to Orlando to visit the Alamo station, continuing straight on to our area on 5/11 and departing from MIA on 5/13. We received accolades this month from Alamo for the very warm welcome to our area, the professionally developed itinerary and the fine support by each and every industry member

2 encountered. The group was particularly impressed with our area’s diversity and our fabulous beaches, of course!

SeaWorld Parks & Entertainment Media Fam Tour (May 17th – 21st, 2013): In conjunction with the opening of “Antarctica - Empire of the Penguins” at SeaWorld Orlando, Sea World Parks & Entertainment Germany has invited a group of five journalists to participate in the grand opening festivities (May 22nd-24th). Edelweiss Air was the co- sponsoring carrier. Costs for required Swiss feeder flights to Zurich were generously borne by SeaWorld Parks & Entertainment. Due to our excellent working relationship with SeaWorld Parks & Entertainment Germany, we have been offered an opportunity to showcase our area on this occasion. We continued to facilitate communication and coordination between SeaWorld Parks & Entertainment and KMS related to itinerary development and pertinent details. SeaWorld Parks & Entertainment’s German PR agency will be forwarding coverage generated as it becomes available.

International Pow Wow (June 8th – 12th, 2013): Preparations are underway for our attendance at this important international trade show. With the appointment scheduled released the middle of this month, we compiled the staff schedule making adjustments as necessary (related to double bookings or adding appointments). We also contacted several industry members to ensure they’d received the invitation to our White Party event, forwarding the eVite where necessary.

Travel Agent Roundtables (September 24th – 26th, 2013): Preparations are underway for the Travel Agent Roundtables 2013 in Berlin, Leipzig and Dresden in cooperation with Visit Orlando and SeaWorld Parks & Entertainment. This month venues were defined and accommodation rates negotiated.

Additional Activity:

Cooperation with SEA LIFE Germany SEA LIFE Centers are a chain of sea life themed attractions. By the end of 2013 there will be 51 centers located around the world. The centers provide fascinating insight into the wealth and diversity of marine life, plays an active role in conservation and inspires others to lend their support, too. With 10 centers in Germany from Berlin to Munich, we have taken up contact with several centers regarding possible future non-traditional pr